One of the leading reasons why 41% of employed Filipinos are in debt is the late payout of salaries. With the country’s robust economic growth, it is just right that labor issues like this one is addressed.
This is the main thrust behind House Bill 6537, or the “Timely Payment of Wages Act of 2017”. It is still being reviewed in the Lower House but if ever this would become a law, it carries enough weight to compel businesses to be always on time in paying their employees’ salary.
The author of House Bill 6537, Manuel Lopez, a congressman from Manila, cited the information from the 2016 Manulife Investor Sentiment Index (MISI) survey as basis for the proposed bill’s relevance.
The survey underlines the fact that 1/3 of the respondents are in debt because of their daily living expenses followed by medical and education expenses. People who belong to the 35 and below age group have an average debt of P291,582. This figure improves in the 35 to 49 age group with a total average debt of P207,418. Both numbers are still sizable considering the country’s wage standards.
The proposed House Bill by Lopez seeks timely payment of salary as written in the contract of employment. 15 days is considered the grace period for any salary delays. Beyond this is considered a violation, holding the employer and/or payroll master liable for the infraction.
The penalties for payroll masters are the following:
- Fine of P100,000 for failure to disburse wages even if the funds are already available.
- Fine of P200,000 for failure to inform employers there is no available funding for the payout.
There are also penalties that can be imposed on employers and payroll masters if there is failure to pay wages with no justifiable explanation.
- A fine of P500,000 and suspension of business for 30 day for the first offense.
- A fine of P1,000,000 and suspension of business for 90 days for the second offense.
- A fine of P3,000,000 and permanent cessation of business for the third offense.
House Bill 6537 and its penalties is seen by many to be heavy handed especially to small and medium sized enterprises (SMEs). But regardless of the size of the business, employers and payroll masters must feel the gravity of paying employees on time, at all times.
For many companies, failure to be on time with employee’s pay can be due to inefficient payroll process. One of the best ways to address preventable payroll delays is to automate the whole process from DTR to actual payout. While many technologies are available to provide for this, only a few are within the reach of SMEs. Look for payroll software options that have low subscription plans. SweldoMo is considered to be the most affordable in the industry today.
Take a look at our fees here and spare yourself from the heavy fines.